Yahoo Investor Steps Up Pressure to Have CEO Fired

A section of a Yahoo! billboard moved in San Francisco. Photographer: Justin Sullivan/Getty Images

May 5 (Bloomberg) -- Yahoo! Inc. is under pressure from
Third Point LLC, one of its largest investors, to dismiss Chief
Executive Officer Scott Thompson for failing to correct false
academic information on his biography.

Third Point, which is fighting for representation on
Yahoo’s board because it says the company is poorly managed,
said Yahoo should “terminate Mr. Thompson for cause
immediately,” after his resume erroneously said he had a degree
in computer science. Yahoo is reviewing the matter.

The investor highlighted the discrepancies in Thompson’s
record on May 3, and yesterday complained that Yahoo isn’t
responding adequately. The dispute adds to challenges facing
Yahoo, which is struggling to revive growth and stem customer
losses. The company hired Thompson from EBay Inc. in January
after ousting his predecessor, Carol Bartz, who failed to gird
Yahoo against threats from Google Inc. and Facebook Inc.

“It is so clear-cut whether one has a degree or not that
it is a deliberate lie and the only reason to do it is to
misrepresent yourself,” said Janice Bellace, professor of legal
studies and business ethics at the Wharton School at the
University of Pennsylvania. “The board should certainly be
looking at his capacity to lead the company and the example he
sets for others in the company.”

Yahoo declined 1.6 percent to $15.15 yesterday in New York.
That left it down 6.1 percent since the beginning of the year.

‘Inadvertent Error’

While Thompson lists a bachelor’s degree in computer
science from Stonehill College, the school didn’t begin offering
such a degree until four years after he graduated, Third Point
CEO Daniel Loeb said this week in a letter to the board.
Thompson has an accounting degree from the school.

Yahoo’s board plans to review the matter, and will later
“make an appropriate disclosure to shareholders,” the company
said in response late on May 3. Yahoo, in its first public
statement on the issue, had earlier called the discrepancy an
“inadvertent error” and said it “in no way alters that fact
that Mr. Thompson is a highly qualified executive with a
successful track record leading large consumer technology
companies.”

Third Point, the owner of about 5.8 percent of Yahoo,
announced plans in March to seek shareholder votes for its slate
of four directors. Yahoo has been struggling to keep pace with
rivals Google and Facebook, which have lured away users and ad
dollars. Third Point has demanded changes at Yahoo, calling it
one of technology’s “most mismanaged companies.”

Thompson Biography

In his May 3 letter, Loeb said that Stonehill only had one
computer-science course when Thompson attended the Boston-area
school. “Presumably, Mr. Thompson took that course,” he said.

Martin McGovern, a spokesman for Stonehill in Easton,
Massachusetts, said that Thompson received a bachelor’s of
science in business administration, with a major in accounting
on May 20, 1979. He declined to comment further.

Thompson’s biography from his time at EBay’s PayPal unit,
as submitted to events such as the 2009 Web 2.0 Summit, also
stated that he had a degree in computer science. Anuj Nayar, a
spokesman for PayPal, said that in recent EBay filings,
Thompson’s degree was listed correctly.

“Under Mr. Thompson’s leadership, Yahoo is moving forward
to grow the company and drive shareholder value,” Sunnyvale,
California-based Yahoo said on May 3.

Questioning Hart’s Background

Loeb said that Patti Hart, a Yahoo board member who chairs
the search committee, inflated her degree too. Hart, who also
serves as CEO of International Game Technology, is listed in
filings as holding a “bachelor’s degree in marketing and
economics” from Illinois State University, Loeb said.
“However, we understand that Ms. Hart’s degree is in business
administration. She received a degree in neither marketing nor
economics.”

Yahoo said in its response that “Patti Hart holds a
bachelor of science degree in business administration with
specialties in marketing and economics from Illinois State
University.”

Jay Groves, a spokesman for Illinois State, corroborated
the business administration degree, saying Hart graduated in
1978 with a concentration in economics and marketing.

‘Ethical Lapse’

Embellishing resumes has led to executive firings and
resignations. In 2009, Intrepid Potash Inc. President Patrick
Avery stepped down after confirming he hadn’t received degrees
from two universities listed on a company prospectus. RadioShack
Corp. CEO David Edmondson resigned in 2006 after acknowledging
he hadn’t earned the degrees in theology and psychology that he
listed on his resume.

Kenneth Lonchar, chief financial officer at Veritas
Software Corp., quit in 2002 after admitting he had lied about
having a master’s degree in business administration from
Stanford University.

“It’s an incredibly serious ethical lapse to falsify
information on a resume,” said Wharton’s Bellace. “The holes
we dig for ourselves, once you start a lie, sometimes it’s very
difficult to step back.”

Others who misrepresented their education kept their jobs.
Microsemi Corp. CEO James Peterson was censured and fined after
a 2009 review found fabricated degrees from Brigham Young
University, but the company retained him as CEO. In 2002, Ronald
Zarrella, CEO of Bausch & Lomb Inc., was found to have listed an
MBA from New York University on his resume, when he had only
taken classes at its business school. He kept his job.

‘Overhaul’ Needed

Third Point faulted Thompson last month for embarking on a
round of job cuts before he articulated a more complete
strategy. Thompson is the former president of eBay’s PayPal
payment business.

Yahoo named three new independent directors in March, part
of its own effort to shake up the board and appease investors.
The company had negotiated with Third Point’s Loeb about adding
one of his nominees and another that both sides could agree on.
The discussions broke down when Loeb insisted that he himself be
added, Yahoo said at the time.

“If misrepresentations were made, they would confirm yet
again that Yahoo is in dire need of a complete corporate
governance overhaul,” Loeb said on May 3. “As we have asserted
repeatedly and forcefully, as Yahoo’s largest outside
shareholder and a voice for our fellow investors, we believe the
Yahoo board requires fresh, outside perspectives from
individuals who have no connection to a failed regime and have
the expertise to address the serious challenges facing the
company.”